The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has raised its benchmark interest rate by 200 basis points to 24.75 Percent.
CBN Governor, Olayemi Cardoso announced the rate increase in Abuja after the MPC meeting on Tuesday. The CBN had on February 27, increased the interest rate to 22.75%.
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The latest hike emphasizes the bank’s aggressive stance on monetary policy tightening to curb inflation.
Domestic headline inflation continued to rise in February 2024, going up to 31.70%, from 29.90% in January.
The Monetary Policy Committee met on 25th and 26th of March to review recent economic and financial developments. They also assessed risks to the economic outlook.
At the end of the meeting, the MPC decisions are as follows:
- Raise the MPR by 200 basis points to 24.75 per cent from 22.75 per cent.
- Adjust the asymmetric corridor around the MPR to +100/-300 basis points
- Retain the Cash Reserve Ratio of Deposit Money Banks at 45.0 per cent.
- Adjust the Cash Reserve Ratio of Merchant Banks from 10.0 per cent to 14.0 per cent
- Retain the Liquidity Ratio at 30.0 per cent
In reaching its decisions, the committed noted that the continued rise in headline inflation, driven largely by food prices because of supply shortages and high cost of logistics and distribution.
The Committee, therefore, was of the view that addressing food insecurity is key to containing current inflationary pressures.
The Committee noted with satisfaction the level of stability achieved in the foreign exchange market in the last few weeks.
The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable.
The MPC also enjoined the Bank to expedite action on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalized world.
Consequently, at this meeting, the MPC was faced with the option of either progressing with its tightening cycle or hold, to observe the impact of the previous rate hike and adjustment of the Cash Reserve Requirement. After review, Members decided on the need to progress with the tightening cycle.
All twelve members attended the meeting. The next MPC meeting will be held on the 20th and 21st of May 2024.
Nnamdi Maduakor is a Writer, Investor and Entrepreneur
